Gold Shines amid Global Financial DistressCOMEX: Micro Gold Futures ( COMEX_MINI:MGC1! )
Gold prices surged Friday as a wave of banking crises shook global financial markets. Spot gold climbed 3.1% to $1,977.89 per ounce, its highest level since April 2022. Gold price is now within $100 of its all-time high of $2,074.88.
In the futures market, the nearby April contract of COMEX gold futures settled at $1,973.5, where the far-month June 2024 contract closed at $2,076.9.
The year-long Fed rate hikes cracked the US banking system. Within two weeks, we have witnessed the collapses of Silvergate Bank and Silicon Valley Bank in California and Signature Bank in New York. First Republic Bank, a mid-sized bank in California, received $30 billion emergency injection from 11 largest American banks, led by JP Morgan.
Interestingly, it was J.P. Morgan who organized a $30 million rescue plan to avert the collapse of Wall Street in 1907. That crisis led to the creation of Federal Reserve System.
A century later, the cost of bank bailout increases by 1,000 folds. However, bank runs have already spread. Credit Suisse, a prestigious investment bank, is under distress. On Sunday evening, fellow Swiss bank UBS announced that it is acquiring Credit Suisse.
Gold Price Rises in Times of Major Crises
In the past two decades, gold price peaked in times of market turbulence.
• The 2008 financial crisis
• The 2010 European debt crisis
• The 2018-19 US-China trade conflict
• The outbreak of COVID pandemic
• The Russia-Ukraine conflict
• The March 2023 bank run
Gold price is also negatively correlated with the US dollar. Last year, when Dollar rose on the back of Fed tightening, gold took a beating. Now, as investors expect the Fed to slow rate hikes, gold shines through the chaos.
Investing in Gold: what in there for you?
• Diversification: Gold helps reduce the overall risk of your portfolio by providing a hedge against inflation and currency devaluation
• Tax efficiency: Long-term capital gains on gold investments are taxed at a maximum rate of 28%, which is lower than 37% for other long-term capital gains
• Protection against rising prices: Gold has historically been a good hedge against inflation, and it can help protect your purchasing power
• Liquidity: Gold ETFs and Gold Futures are highly liquid financial instruments. Many brokers also buy and sell gold bars and gold coins, with a commission.
• Hedge against difficult economic conditions: Gold is a global store of value, and it can provide financial cover during geopolitical and economic uncertainty
• Portfolio diversifier: Gold can act as a hedge against inflation and deflation alike, as well as a good portfolio diversifier
In a previous writing, I showed that gold did not work well as a hedge against inflation.
However, gold holds up extremely well during major crises where other assets lost value.
Hedging against Known and Unknown Risks
Risk on, gold goes up. Risk off, gold declines. Some risks are expected, while others come as a surprise.
Fed rate actions are scheduled events and can be considered known or expected risk. CME FedWatch Tool shows the likelihood that the Fed will change the Federal target rate at upcoming FOMC meetings. It analyzes the probabilities of changes to the Fed rate and U.S. monetary policy, as implied by 30-Day Fed Funds futures pricing data.
As of March 19th, FedWatch estimates a 38% chance of Fed keeping the current rate unchanged at 450-475 bp, and 62% odds of increasing 25 bp to 475-500 bp.
By providing $300 billion in emergency lending to member banks, the Fed has effectively put Quantitative Easing at work. In my opinion, the Fed has switched its priority from fighting inflation to crisis management. Managing the systemic risk in the US banking system outweighs the battle against inflation at this time. It’s a matter of priority.
What’s unknown is the potential failure of any bank not yet exposed in the news. US banks are estimated to sit on unrealized loss in hundreds of billions of dollars in their bond portfolio, largely consisted of Treasury and US agency bonds. As the “held-to-maturity” asset will be sold or marked down, these banks could run into trouble by a run of depositors and investors. In this unusual time, no news is good news.
Short-term Trading Strategies
The upcoming FOMC meeting on March 22nd make a compelling reason for event-driven trades on Micro Gold Futures.
Here is my logic:
• If the Fed keeps the rate unchanged, stock market would rally. As a major risk is removed from the financial system, gold price would fall
• If the Fed raises 25 bps, stock market would fall, and gold price would rally, potentially breaking the current record high
Micro Gold Futures (MGC) contract has a notional value of 10 troy ounces. At $1,993.4, an April 2023 contract (MGCJ3) is valued at $19,934. Initiating a long or short position requires a margin of $800. This is approximately 4% of contract notional value.
If gold price moves up to $2,050, a long futures position would gain $566. Relative to the initial margin, this would equate to a return of +70.8%, excluding commissions.
If gold price moves down to $1,900, a short futures position would gain $934, a theoretical return of +116.8%.
Unexpected market event could be a trigger for gold price to rally. An event-driven trade idea could be constructed around it. In my opinion, comparing to the distress of regional banks, the systematic risks triggered by a Big Bank failure could send global market in shock at ten times the magnitude. If the Fed raises rate next week, I expect more bank failures to coming in the next few months.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
Federalreserve
THE MOST USEFUL TRADING SITES ...and how to utilize themIn this post, I will share the some of the most useful trading sites that are available to you and how you are able to utilize them to your advantage whether it's for fundamentals, charting, analysis, performance tracking, news events or just to follow your favorite professionals and their ideas & education that they share publicly.
First and foremost, if you haven't made this your PRIMARY trading platform, I want to encourage you to use and SUBSCRIBE to TRADINGVIEW
As we all evolve as traders, I'm sure we can all relate to one thing in common which is hard work and dedication. Trading is one of the hardest professions out there and without hard work, practice and dedication, we know that 90% of traders fail to make it in this industry. TRADINGVIEW gives you all the resources you need to be able to become one of the 10% as it enables you to become a content creator, it gives you a community to research ideas, you're able to watch livestreams, catch news flows, back test & analyze your own strategies and most importantly of all, you have direct support team to help guide you by sharing their own personal trading experiences, publicly as well as privately. Whether your choice of market is Forex, Stocks, Crypto, Bonds, Futures, Commodities or Yields, TRADINGVIEW has all the tools to be able get you well on your journey to become a professional trader.
See Figure 1: Subscriptions
WWW.MYFXBOOK.COM
MYFXBOOK has a variety of different tools to use ranging anywhere from position size calculators, COT data (Commitment of traders), Broker spreads/quotes/volumes, news flows, correlations and most importantly, account linked performance analysis. You may be a full time trader or a part time trader with a 9-5 job, either way analyzing your entries, exits, RR ratio, drawdowns etc. are necessary to find what works and what doesn't. Trading is about probabilities and if you're not making money in 25 trades, you need to reanalyze and change your approach. Myfxbook.com allows you to link your trading platform to breakdown your performance, ultimately being your own coach to find the approach that suits you the best.
See Figure 2: Performance Stats
WWW.TRADINGECONOMICS.COM
As many different crises happen throughout the world (especially the most recent ones within the last few years), understanding how the Federal Reserve operates to manage monetary policy is key to get an edge in your positions in the forex market. TRADINGECONOMICS gives you all the accurate information needed to be able to forecast and research throughout 196 countries like, economic indicators, exchange rates, stock market indexes, government bond yields and commodity prices. Micro and Macro economics are a big part of how this world operates and having access to all the most important information that drives the Feds decisions due to the economy being split between these two realms are valuable as they could be bridged together for more accurate forecasting.
See Figure 3: Inflation Rates/GDP Growth (By Country)
WWW.FOREXLIVE.COM
FOREXLIVE has many different helpful resources to keep you up to date in the market no matter what time zone or trading session you take part in. As our lives are busy with family, day jobs, business endeavors or simply being in different time zones, you may not be able to watch all sessions play out and in fact, taking a break from the screen is healthy for your mind and emotions. The great thing about FOREXLIVE is that you are able to read Session Wraps to keep you up to date with a summary after each session (Asian, European, U.S) completes. Psychology is a big part of why a trader either succeeds or fails which balancing your time on and off the markets are important to detach your emotions from your positions. Set a plan for how many times you will scan the charts a day and fill that in between time with activities like exercising, reading, chores, spending time with your family, going for a walk and much more.
See Figure 4: Session Wraps
WWW.INVESTOPEDIA.COM
INVESTOPEDIA was founded in 1999 headquartered in the heart of New York city U.S. This website provides comparisons of financial products, reviews, ratings, comparisons of different financial products and most importantly, it is a financial dictionary. With the broad range of information provided, it gives readers the confidence to manage every aspect of their financial life. Whether you're learning about money and investing for the first time or are looking to improve your knowledge and skills, anyone from an experienced investor, a business owner, a professional, an advisor, INVESTOPEDIA has all the information to build your skills.
See Figure 5: 4 Basic Things to Know About Bonds/Key Takeaways
WWW.INVESTING.COM
INVESTING.COM is a well known site that offers real-time market quotes, information about stocks, futures, options, analysis, commodities and most importantly an economic calendar. Keeping an eye out for the high impact news events will help you adapt and control the volatility during those peak hours. Another helpful aspect of this site is knowing what will drive the market mood for each upcoming week. The top 5 most important fundamental areas to watch for are explained and broken down to help your forecast and analysis so you can prepare your trade setups accordingly. Applying fundamental analysis along with technical analysis will help you become a better trader as when the high impact news events hit, markets get volatile which could cause a running profit turn into an absolute loss. Knowing when to be in or out of the market is valuable so you don't go into a draw down phase.
See Figure 6: Economic Calendar
As I only have mentioned a small number of sites that you are able to access, we all know there are so many other ones available out there, paid and free.
Researching and spending the time to read to broaden your knowledge in the financial world will only help you grow as a trader and essentially improve your trading results.
Check out some more free sites:
www.fxstreet.com
www.dailyfx.com
www.forexfactory.com
www.babypips.com
Please share the site that most helps you in by leaving it in the comment section. I would love to see the variety of ones available.
** If you felt this was helpful in anyway, please support by hitting the LIKE button and FOLLOW me for more educational and analysis ideas **
I appreciate all the feedback!
Thanks
Trade Safe
The SVB Collapse and Why It Matters To YouInteresting situation with the collapse of SVB (SIVB), the people have yet to realize we control the market not the central planners. and the collapse of SVB is a realization of that power. So , here is what i know from the very little articles and podcasts that I listen to and I will give you guys the why its important.
From what i know is that SVB business model was somewhat risky in the first place, and their main consumer base was startups, and tech startups. hence the name Silicon Valley portion of Silicon Valley Bank.
Now a little money education... in the world of money and currency (remember currency as current it will become important later) there is a concept called the velocity of money, basically the volatility of money. for my stock traders think the VIX. when the VIX is low there is no money to be made because money is not moving. but when the VIX is high there is plenty of money going around so why not use your dollars as napkins, right or "fun coupons"! this is the velocity of money the faster a person can make money move the more money they stand to make. the banks know this. So when you go to the bank and deposit your check your money is already out the door into something else before you're able to but your wallet in your bag or pocket. this happens because of what is called as the "fractional reserve system" and to be honest its a "F"ed up idea but has worked thus far. what this system means for every dollar you put into the bank, the bank can lend out 10$.
A bank is a business it makes its profits by lending money, and when you save your money it cost the bank money, because of your .01% interest rate. the reason for the big push for open accounts is because the more open accounts the bank has means the more money they have liquid, which means the more they can loan out, which means the more they stand to profit. now as an insurance policy the US government makes the banks keep a fraction of their total account balances on site incase of what they call a "bank run" happens (get to what a bank run is later)
Now, normally you dont notice this or even care because when you go to the bank and want to pull 100$ from your account its no big deal whats a 100$ when your dealing with 100s of thousands. you want a 100$ you get 100$ instantly.
But want to see the system become a problem for you, if you have more than lets say 25,000$ or more in an account go try to pull ALL that money out and see what type of road blocks you encounter. they will make you give ID, reasons for shutting down the account, basically your first born child and your blood type. partly is because they really want to know why you're closing the account, because thats profits walking out the door.
but the main reason is, they have to reach out to sister branches and other banks to pool that money together to be able to give it to you and this typically happens like over night. so if you think you're about to waltz into your local bank and demand a 25,000$ check right then and there you're sadly mistaken. the same exact process happens when you take out a mortgage, now your talking $200K and up so now there are more road blocks. whether you're the buyer or the seller. you sell your house for 500K and you think that check you deposited is there right when you get it... yeah its not!
back to the currency comment money is now a currency it has to keep moving to keep its value. think of it as a river, mostly you can drink water from a river and be okay because bacteria cannot grow in moving water but drink water out of a pond and you just might catch Syphilis (sarcasm intended). money is the same way, the faster you can make it move the more you stand to make and the healthier the money is, if take money out of the river and stick it in your pond as a savings account inflation will eat it alive making it very unhealthy. Even historically before all this crazy inflation started happening the savings rate in a savings account was like 0.01% and inflation was around 2 percent.
Now the importance of this lays with the SVB. When looking at their business model it seems solid... "invest in high beta companies, or higher risk endeavors, then to off set this risk we will load up on the safest paper assets money can buy... the US 10Y bond." Officially the US hasn't defaulted on loans before... i mean we will print more money before we default. I mean it sounds like counterfeiting if you ask me, but who am I just a low key, low level, low volume trader with a computer living in my moms basement :) sarcasm... or is it?!
Well from the looks of it it would seem SVB bought a ton of these 10Y bonds in 2021 when the economy was ripping and roaring. So, when bond yields are down their prices are way up. So in the full swing of the "roaring 20's" yields were around 1.12X or keeping it simpler 1.1XX. so that must mean the value must of been sky high. My only rational thought for this type of purchase was the risk manager must of thought he could off load the bonds in the bond market for a nice profit thinking good times were going to continue. On the surface it seems okay high risk business model with a low risk counter weight.
But "We the People" were leaving SVB, and going back to what i said about taking your 25,000$ savings out, and they were running out of reserves and their bonds were worth less than the paper they were "printed" on, so they filed a loss on their report. on the surface this was fine, because only die hards read a companies 10Q or 8A but all it takes is one... and there is always that one Guy... and not this Regular Guy either. I personally dont like the instability of the tech industry. i mean i do believe we will make a full blown terminator but i dont want to gamble on which company that is regardless of what the gain is... might as well go gamble in my opinion.
So, because there was a mass exodus of accounts they were having a hard time fill orders so file your 8A detailing you're offering more stocks to drum up some money and it falls flat. people read said 8A and see that you dont have cash so the word got out and the consumers made a bank run. Dont get it twisted either this can happen to any commercial bank JP Morgan, BofA, Chase, Citi, Credit Suisse and the like.
a bank run is when the majority of depositors want their money back now and they do it in close succession of each other forcing the bank to say "we dont have your money" so they in essence "run" to the "bank" to get their worthless paper.
Now, what i just learned is back in '08 our amazing government passed legislation basically stating they will no longer bail out banks. (honestly if you guys know the piece of legislation please post it in the comments) I agree with this legislation because when I lost 15k on a bad USDCHF trade 7-8 years ago the government didnt bail me out. that was all my money... just gone in a matter of seconds. So the US government came out and said " we will make sure all depositors will get their monies back...
How?
step in Bail-Ins
And again a bail in is something i literally just learned about... i swear at this point were just making -ish up at this point... ok so we know what a bail out is... basically the US government funnels all this cash into a failing business(s) and the tax payer picks up the tab. so what is a bail-in?... glad you asked
a bail-in is when the depositors pick up the tab...
How?
well the FDIC picks up the first $250K and anything over that 250K is now funneled into bank to help offset the loss.
so if you have $500K in the bank the first $250K is yours... uncle sam gives it back via FDIC (which that money has been long gone spent, so i dont know where theyre going to pull money from to keep this facade of the FDIC up) and the next $250K is the banks... So congratulations you have just become a unwillingly silent partner of a failing bank. -ishy news is that the current administration is trying to give more power back to the IRS and bring it back to its glory days like it was in the 80's so you wont be able to claim those losses on your taxes, if you had a business friendly administration you might actually have a fighting chance.
i have a feeling the whole world is watching what is about to happen, because the entire banking system relies on high value accounts. if the US says tough luck that might send uneasy shock waves to all the high income earners and might make them want to pull their funds out of the banking system...
there is a very interesting article on Credit Suisse that i want to read
so ciao!
SVB: Understanding and Managing Interest Rate Risks CBOT: 10-Year Treasury Futures ( CBOT:ZN1! )
Last Wednesday, Silicon Valley Bank (SVB) NASDAQ:SIVB announced that it incurred $1.8 billion loss in the sales of its bond portfolio and sought to issue new shares. Within 48 hours, a bank-run induced by panic customers brought down the legendary bank.
On Friday, US banking regulators seized control of SVB. By Sunday, the Treasury Department, the Federal Reserve, and Federal Depository Insurance Corporation (FDIC) jointly announced a rescue plan that would make whole all depositors. However, SVB shareholders are not protected.
Why has happened to the well-respected and once well-capitalized bank?
Opportunity and Risk Go Side-by-Side
Traditional banks seldom extend credit to startups, which are mostly under-collateralized, with little or no profit and big uncertainties about their future survival.
SVB developed a niche competitive edge to provide banking services to companies funded by venture capitals. In the past 40 years, it nurtured many high-profiled tech startups through their entire life cycle, from early-stage to IPO and to Big-Tech giants.
If Sequoia Capital invested in your firm and you apply for a loan from a commercial bank, you can expect the loan officer to ask: “Sequoia Who?” But if you go to SVB, they would say: “$10 million will be in your account tomorrow.”
VCs are exceptionally good at spotting future technological trends, and they follow a rigorous due diligence process to pick investing targets. By working with VCs and startups closely, SVB created an ecosystem that foster technological innovations, and grew to become the 16th largest US bank by deposit.
However, SVB’s concentration in the high-tech sector also make it vulnerable to a boom-and-bust cycle. Last year, bear market hit the industry hard. Publicly traded firms couldn’t raise money with falling share prices. Private companies found the path to IPO got blocked. As startup clients withdrew deposits to keep their companies afloat, SVB is short on capital. It was forced to sell most available-for-sale bonds at a huge loss.
Bad news travelled fast in close-knit tech investing community. VCs urged their portfolio companies to get the hack out of SVB. All told, customers withdrew a staggering $42 billion of deposits on Thursday. By the close of business day, SVB had a negative cash balance of $958 million, according to the filing, and this triggered the government takeover.
A Commercial Bank with a Failing Grade
In fiscal year 2022, SVB earned $4.5 billion in Net Interest Income (NII) and $1.7 billion in non-interest income. When you take away the bells and whistles, SVB is by large a commercial bank. About 73% of its revenue comes from taking in deposits at a low interest rate and making loans at a higher interest rate.
Based on its 2022 10K filing, SVB managed $209.2 billion in total interest-bearing asset and earned $5.7 billion. This represented an effective yield of 2.73%. During the same period, SVB paid out $1.2 billion in funding cost, which equated to 0.57%.
• Therefore, in 2022, its NII = 2.73% - 0.57% = 2.16%
• In comparison, its NII for year 2021 was 2.02% (=2.09% - 0.07%).
• On the surface, SVB was doing well, with NII spread increasing by 14 basis points year-over-year.
What has gone wrong then? Dive deeper into SVB’s balance sheet, we see the long-dated Treasury bonds and illiquid mortgage-backed securities it held got hammered by the rising interest rates. Simply put, SVB got its interest payment back, but the value of its investment principal eroded in a huge way in a rate-hiking environment. All in all, managing interest rate risk is at the core of banking business.
A Naked Bond Portfolio
In its 10K, SVB puts its investment portfolio in Available-For-Sales (AFS), Held-To-Maturity (HTM) and Non-marketable securities categories.
AFS balance was $26.1 billion as of December 31st, including:
• U.S. Treasury securities $ 16,135m (61.9%)
• Agency-issued MBS $6,603m (25.3%)
• Agency-issued CMBS $1,464m (5.6%)
• Foreign government debt securities $1,088m (4.2%)
• Agency-issued CMO—fixed rate $678m (2.6%)
• U.S. agency debentures $101m (0.4%)
• Total AFS securities $26,069m (100%)
Last week, SVB sold $21 billion in the AFS portfolio and incurred a loss of $1.8 billion, or -8.6%. AFS assets are marked to market every quarter. My understanding is that the loss figure was based on selling price vs. year-end fair market value.
Total loss calculated from purchasing price could be much bigger, as these bonds may have been marked down multiple times during previous quarters. Evidence: Since March 2022, CBOT 10-Year Treasury Futures (ZN) price went down from 124 to 109 (-12%) and 30-Year Treasury Bond (ZB) fell from 152 to 118 (-22%).
CBOT Treasury futures market, with its sheer size and liquidity, makes it the marketplace of choice to manage interest risk in times of uncertainties. Each ZN contract has a notional value of $100,000.
• On Monday March 13th, daily trading volume is 3,760,911 lots, which translates into total notional of $376 billion. Open interest (OI) stands at 4,311,338, or $431 billion in notional.
• Volume and OI for ZB are 719,518 and 1,209,881, respectively. Notional value for each is $72 billion and $121 billion, respectively.
What’s Next
On Friday, Signature Bank customers spooked by the SVB collapse withdrew $10 billion. That quickly led to the bank failure. Regulators announced Sunday that Signature was being taken over to protect its depositors and the stability of the U.S. financial system.
Despite government intervention over the weekend, fear ran contagious through the financial industry this Monday. San Francisco’s First Republic Bank, which had $212 billion in assets at the end of 2022, saw its stock price plunge as much as 70% when the market opened Monday morning.
By market close, US stock market stabilized. Investors wonder if a banking crisis could be the final punch to end the year-long Fed rate hikes.
Lessons Learnt
As investors, we usually allocate our financial assets across various instruments, such as stocks, bonds, and derivatives. The 60 (stock) / 40 (bond) portfolio is the most popular advice from Wall Street.
People generally pay more attention to what stocks to buy and hold, but we may not think twice about managing interest risk in a rising rate environment. The SVB fallout shows that even the safest, risk-free Treasury bonds, if not actively managed, could fall prey to interest rate changes and liquidity risk, resulting in loss of market value.
For me, this is a wake-up call and a good time to review my bond holdings. Some may be hidden in a 401K retirement plan. Hedging interest rate risk with CBOT Treasury futures and Micro Yield futures could go a long way to stay solvent.
A View on Interest Rate Trajectory
Today, the Bureau of Labor Statistics reports that the consumer price index rose 0.4% in February and 6% from a year ago, in line with market expectations. This is the most recent data the Fed will consider before it makes interest decision on March 22nd.
Inflation is cooling, but still too high. A bank run shows how damaging rising interest rate is to the economy. Whether the Fed will continue its rate hikes, pause them, or end them altogether, I think all options are open.
In my view, interest rate is in an uncharted territory once again. With investors in panic mode, they will likely overreact to the Fed decision. This may be a good time to place an order of out-of-the-money options on CBOT 10-Year Treasury Futures (ZN).
On March 14th, the June ZN contract is quoted at 113’220. Quoting convention in Treasury market is 100 and 1/64th. The quote reads as (113 + 22.0/64), or $113.34375 on $100 par value.
If the Fed slows or pause the hike, Treasury price will likely go up. Call options would be appropriate in this case.
• The 115-strike call is quoted 0’20 (=20/64). This is converted into $312.5 premium on the $100,000 contract notional for each contract.
If the Fed stays its course on fighting inflation, Treasury price could fall. And put options would be a way to express your view.
• The 112-strike put is quoted 0’14, or $218.75 premium per contract.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
The current context is serious | Forex-Indices-Stocks-Crypto |It seems that inflation is considered the devil for the markets, so the focus will be on the next Fed meeting scheduled for March 22nd. Last week we saw a strong increase in NFP and this could be the first sign of a hawkish FED, but this week we will see the second and final sign for the markets: CPI release. These two drivers will complete the big economic figure ahead of the interest rate announcement.
In recent weeks Governor J.P has been under a lot of pressure from the financial community (including Janet Yellen, Treasury Secretary and former Fed Governor) due to the large risk of contraction and the impact of such aggressive monetary policy. But perhaps the news about failure of some banks could prove to be a strong ally of Powell. Why am I saying that? If the Fed's target is to drag the US economy into a mild recession to try and get inflation back to around 2 percent, concern that these two failures could be contagious within the banking sector could help Powell achieve the first target: "bring down inflation...".
Even the geopolitical context should not be underestimated: The war in Ukraine and China-United States tensions over Taiwan.
We will see the impact on the main markets (dollar, SP500, gold...) in the second part of this analysis.
Is the DXY in trouble!?? Before we start all views are my own and are based from my overall personal research.
As we have covered in previous markups and breakdowns we are taking our major lows on the larger timeframes on the DXY.
Here we have a pretty simply markup here for DXY iam only looking at this for a short term idea overall i strongly believe we are set for some serious downside on the USD and with this iam waiting for a true shift to show itself...
As many countries begin to decouple from the USD and the fed continues pushing the price to unsustainable levels with consistent printing of new currency we are watching history unfold in front of our eyes...
Taking a deeper look into the history & future of the USD.
The control and power that the US has had in the past is drastically dwindling... if you follow the power trial to its source it will and always has lead us back to the federal reserve.
Now the above is an issue for many different reasons... the main reason being no country or persons should be governed or controlled by a bank or reserve, which for a long time has been the case... this leading to countries having economic collapses along with huge depts placed on them in times of crisis, when this happens to a country it 90% of the time means one side is gaining while the other is losing. due to this we are and will continue to see more countries disconnect and distance themselves from the USD.
Once we get to our tipping point where the USD has truly lost its grip on the global economy it will be to late to revert from its course, which i believe will take us to lows we've not seen in decades, ultimately leading to the collapse of the USD...
Now iam no economist nor a financial expert, but I urge everyone that reads this to do your own research to the state of the USD and how the fed is "dealing" with the matter.
To sum up, iam looking for prices to drop below 100 on the DXY in the coming months and possibly even weeks...
Whatever the outcome trader stay safe and stick to your plan!
🟨 SP500 based on YoY GDP ChangeVolatility in many times in the market is bad and the stock market is a mirror of the economy.
When you go back prior to the Great Bull Market (1980s), you wll see that there were very wide swings in real GDP. These are the Boom and Bust cycle.
Now, as the FED evolved its policies it learned how to contain the market and flatten the Boom and Bust cycle and flatten the economy. And you can see that when we have the low volatility in GDP, the market has been very much accustomed to this.
However post 2020 we are more volatile then ever. This is exactly why the FED is stepping hard on the breaks until they for sure put a cap on the upside and on the inflationary side.
It is again interesting to see that Volatility is just bad for the market.
NAS100 Monthly We all know the federal reserve are trying to fight inflation . Last nfp on febuary 3rd 2023 came out hot 517k , this is scary for the federal reserve as they were hiking interest rates at .25 now they are looking at a possible 50bs . If price close below 10927.0 on the weekly there is a high probability, we could CRASH . The daily timeframe is maintaining structure creating LH and LL. Jerome powell will crash the markets to get inflation at 2% the targeted goal he dont care.
SIVB drop of 60% in one dayWhile everyone, including FED, is assuring that banks are adequately capitalised and there is nothing to worry about.
These are not good signs.
Manage your portfolio risk.
DOLLAR dxyLETS start to buy dollar by today.
reasons:
1.Fed testifies that unemployment rate gonna increase.
2.Fed is gonna continuing increase the interest rate.
3.Inflation still high and way far from Fed's target 2.
4.NFT came last month high rate 517K and its highest data until last year June.
5.Today we have NFP data and might be bullish dollar again and even if not I am still bullish pn dollar and
i will look some other support levels to buy.
BITCOIN "make or break" According to Elliott Wave analysis, Bitcoin's fifth wave appears to have completed at a high of $25,250 and the price has fallen from that level. The key support level of $21,510 has been broken, as well as the Fibonacci level of 0.5 at $20,363. It's important to wait for a daily close to confirm whether the 0.618 Fibonacci level at $19,209 can hold as major sell-offs may occur if it fails. The potential levels to watch for are $17,567, $15,476, and $12,817. The golden ratio of 0.618 also supports the $19,209 level as a critical support.
It's worth noting that this Bitcoin collapse is driven by the actions of central banks of all countries, and if Bitcoin can survive the Fed rate hike, we may see a new all-time high. However, this remains to be seen and will depend on a range of economic and geopolitical factors. In summary, Bitcoin is currently experiencing a significant correction and it's important to keep an eye on the key support levels mentioned above to gauge its future direction.
DXY Outlook 9th March 2023On Wednesday, Fed Chair Powell indicated that the Federal Reserve was ready to speed up interest rate increases, if warranted by incoming data.
This was a reversal to what the market had expected, with most speculations regarding a possible pivot on the current monetary policy to slow down on future rate hikes.
This headline news saw the DXY strengthen significantly from the 104.60 price area, breaking beyond 105, to reach a near-term high of 105.88.
While Chair Powell's overnight testimony saw the DXY retrace briefly to retest the 105.36 support level, this move was unsustained and the price rebounded from the support.
Currently trading at the 105.65 price level, and with no major news for the US today, the DXY will likely consolidate along this range for the short term, between the 105.36 and 105.88 price levels.
Inflation (CPI) - A Battle Already LostInflation ( CPI ) - A Battle Already Lost
I've recently shared my outlook on CPI and where I think its headed in the months ahead but after further review, it seems that I've previously overlooked certain signals which should have altered my perspective in a way that it did not. Based on discovery of those signals, I have now updated my anticipatory CPI chart to highlight certain levels of interest.
As we can see on the wavemap, the Consumer Price Index (a measure of inflation) has broken above its 40+ year bearish trend line. The breakout was very strong and should be considered as very significant. The format of the wave during this breakout has developed as what seems to likely be a zig-zag formation. Noticeably, the upside zig-zag wave has retraced 90% of the 40 year long bearish drawdown. Therefore, leaving little probability of it being a truly corrective wave. Aside from the macro bear trend-line, I have also highlighted the newly respected bullish trend-line.
Finding resistance near 6.77, Fibonacci measurements suggest that the pending action will fall to retest the former price containing trend line and maybe even drop below it. Specifically, Elliott Wave Theory suggests that 0.99-1.01 should be the downside target range. Over the past 20 years, this level has also supplied nearly unbeatable support. If support is once again discovered near 1.00, the currently active wave could then be sent to retest the red bullish trend, at a level near 9-10.
Ultimately, completion of the blue diagonal will signify that the CPI (and inflation) area headed for upside levels that the American economy has never witnessed. Personally, I believe that inflation is a byproduct of capitalism and there is no true containment possible. The next decade will prove to show if this is on point or simply farce.
US30 Intra-Week Analysis March 8th 2023Last week, the US30 index tested a key level of 32500, and despite bullish efforts to maintain strength, we were unable to break below it. Instead, we saw a slight relief rally to end the week at the 33400 level. As we entered the new week, our main bias was bearish, but we had to remain adaptive due to the upcoming FED speech and jobs data. Powell's hawkish speech indicated further tightening of financial conditions and efforts to fight inflation, causing US30 to flip bearish and drop back into the range just above 32500. If Dollar Domination continues, it's likely we'll see price consolidation as we pick up new orders, and we may potentially begin trading below 32500. Alternatively, we could see a potential liquidity grab to the upside if buyers attempt to squeeze in more profits before the market shifts.
Bitcoin weekly pattern repeats ?As you can see in the chart, it would seem that history is repeating itself a little on the PA
There have been many that look at the PA from 2013 and draw similarities but I've not seen this and so I will post it again
It Must be noted that there is a tolerance of 7 days to these numbers as a weekly chart has 7 days, but its near enough as you can see
Using the 50 EMA ( Red )
From the ATH in Dec 2013, PA remained above the 50 for 266 days till it dropped below - 84 days later, it came back up and touched, pushed through briefly before going back down for another 427 days before it came up, broke through and continued above the 50 for another 784 days to the new ATH
PA has repeated this almost ecactly since the High around April 2021 and we are right on the point where PA, if it wasn't being hit by fundamentals / FED . Fear etc, would be about to push through the 50, as can be seen on chart.
If PA manages to break through now and continues along this "pattern" it would reach an expected New ATH around April 2025, which amazingly has confluence with some other charts and ideas.
For this to work, Obviously, the fundamentals have to work in Bitcoins favour and one of those may well be the continuing fight with inflation in the USA
It has to be said, there is NEVER any certainty with Fractals and Time pattern repeats but there does seem to be a strong similarity, and I find that Fascinating.
I hope you do too
EURUSD - It's at a very important area!EURUSD - It's at a very important area!
EUR - We are currently at a very important support area of the range.
What's happening to the market fundamentally?
Yesterday we had a very Hawkish Powell, as I mentioned in my previous post we had the indication of 25 basis point but I did mention we could perhaps change to 50 well.. embedded that in and we had a hawkish upward revision upward revision to the 2024 Dot Plots and Fed Swaps Now Favours 50bp Hike In March Repricing Higher From 25bp as mentioned by Powell is not out of picture and being priced in. Now that's a very important information... We had 2 yrs escalate to 5%. The 2% target of inflation will be achievable and it is a global target. Even though we have a hawkish ECB, pricing in further hike. The dollar is having much more of a major movement overall.
We had Gold hit 1800 areas again re-test of the lows, yields head higher, Yen 137 area and euro at the most important EUR 1.05 areas a break of this level, 1.04 can easily be achieved. However, if we break above the highs, I expect us to go towards 1.09 areas... Currently, we are within the ranges of highs: 1.07480 & lows: 1.04900.
Don't forget we have a busy docket today: ADP, Fed Chair Powell Testifies, JOLTs...and end of this week NFP!
Have a great day ahead,
Trade Journal
Key tip: Don't forget Risk Management!
Btc Analysis and Trade Idea💸 #BTC (Bitcoin)💸
📊 3H-30MIN
Follow The Trend and waite for long confirmation in Bullish Order Blocks
🟢Minor Bullish Order Block:21500$
🟢Major Bullish Order Block:21350$
🟢Major Bullish Order Block:21000$
🔴Minor Bearish Order Block:22700$
🔴Major Bearish Order Block: 23600$
⚠️Daily Volume profile 18885$
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📊Powered by Smart Money Concept+Volume profile
🆚Risk/Reward Ratio:10
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👤 Analysis by Trader_Needs
📅 03.08.2023
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USOIL chart & US inflation Ticker belowHere is the cause of inflation - OIL
As its price rises, initially, nothing changes ( Arrows)
But once the increase in cost is begun to be felt
Retails prices rise to cover increase costs of manufacture, transport, staff
Staff demand more wages so they can buy goods
Repeat
Then The FED comes in , raises the cost of Borrowing, putting pressure on retail to LOWER prices so that the Pubic can buy goods
Note how the price of oil drops PRIOR to the effects of raises in interest rates
HERE is your Problem
Also, take note of the contract that the Petro$ had and that has now been Stopped by OPEC countries. The OIL charts over the next few years are going to show some interesting patterns I thinnk
Gold Pressured by Powell's Testimony, Approaches $1,800 Support Gold prices came under pressure on Tuesday as the U.S. dollar strengthened across the board following the Federal Reserve Chair's semi-annual testimony before the Senate.
At the time of writing, the spot price XAU/USD is trading at $1,818 an ounce, 1.55% lower on the day, having hit a one-week low of $1,815.
The U.S. dollar rallied on the back of hawkish remarks from Fed's Chair Jerome Powell. In a hearing before the Senate, he signaled his willingness to raise rates at a faster pace. He noted that the ultimate level of interest rates is likely to be higher than previously anticipated, given that the latest economic data have come in stronger than expected.
The next round of data, including February nonfarm payrolls and inflation numbers, will likely determine whether the Federal Reserve will opt for a 25 or a 50 bps rate hike at the March 21, 22 FOMC meeting.
After the testimony, Wall Street indexes plunged while short-term Treasury yields jumped, with the 2-year note rate reaching its highest level in 15 years at 4.979%. Higher yields further boosted the dollar, weighing on XAU/USD.
From a technical perspective, the XAU/USD short-term bias has turned bearish according to indicators on the daily chart, which have accelerated south, while the price broke below the 20-day Simple Moving Average (SMA) and approaches the $1,800 psychological level, critical short-term support point.
A break below the latter could open the door to a deeper decline targeting the 200-day SMA at around $1,775. On the other hand, the immediate resistance area is seen at the $1,845-50 region, followed by the weekly highs at the $1,860 zone.